PASSING THE BUCK

PASSING THE BUCK; War. Peace. Aid. All Issues Are Trade Issues

By DAVID E. SANGER

Published: January 15, 1995

WASHINGTON—
JUST hours after the Senate confirmed Robert E. Rubin as Secretary of the Treasury last week, he received an immediate full-immersion lesson in what life is like these days sitting under the giant portrait of Alexander Hamilton. Rather than arm-wrestle with Newt Gingrich over the Administration's forthcoming budget, or shoot his signature over to the Bureau of Engraving for inclusion on every new dollar bill, he spent endless hours on the telephone to capitals around the world, trying to keep the United States' biggest neighbor, Mexico, from going down the tubes.

Mr. Rubin's task was to out-psych currency speculators and nervous investors the way American policy-makers once tried to out-psych the Soviet military: Make elaborate and very public plans for coming to an ally's defense in hopes of deterring all attacks. In this case, the plans were for loan guarantees for Mexico, stitched together Thursday night at the White House by Mr. Rubin, President Clinton, Mr. Gingrich and other Republican leaders, and the chairman of the Federal Reserve Board, Alan Greenspan.

It is still unclear whether they accomplished enough to keep Mexico's currency crisis from turning into a nightmare: wild inflation and political instability on America's southern border, an influx of more illegal immigrants, and rattled markets in other booming but developing economies from Brazil to Indonesia. But whether the plan works or not, Mr. Rubin, a former co-chairman of Goldman Sachs & Company, was already engaged in a new age of American foreign policy, in which Treasury, Commerce and the United States Trade Representative take the lead in managing many of America's most strategic relationships and the State Department focuses on the Middle East and the current hot spot (maybe Port-au-Prince, maybe Grozny).

"Everyone's been saying for a long time that foreign policy is becoming economic, but like everything it's taken a while for the message to sink in around here," the former Treasury Secretary, Lloyd Bentsen, said just before he left town last month. "It just shows you how important the economic issues are internationally, and that's a situation Secretaries of State don't work at very much."

The job of Treasury Secretary has permanently changed, Mr. Bentsen argues, and the result is that it has virtually merged with the job of Secretary of State. In a number of recent interviews, he told about turning Boris Yeltsin around on issues of Russian aid, pressing top Japanese officials to change their tax policies in an effort to spur more imports, cajoling Latin American leaders to speed the pace of reform.

Mr. Rubin may not be quite as tightly focused on his mission abroad; during his largely pro forma Senate confirmation hearing, he talked a good deal about job retraining, capital gains taxes and budgetary prudence. But the fact is that domestic fiscal policy is virtually dead; there is not enough discretionary money left in the budget to spur growth internally through government spending or big industrial policy programs. There is widespread acceptance of the notion that if the American economy is going to expand, it will do so through exports of goods, services and information. Even Warren Christopher says so. But his response has been to hand away countries to his colleagues, one by one.

He started with Japan, concluding that America's problems with its greatest ally in the Pacific were largely economic, and thus out of his bailiwick. China came next: Ever since last spring, when Mr. Bentsen won the day in one of the Administration's biggest policy arguments and persuaded Mr. Clinton that the linkage of human rights to trade relations with China was a recipe for America's commercial ruin, China policy has been dominated by the likes of Commerce Secretary Ron Brown and the United State Trade Representative, Mickey Kantor.

Their talk of "commercial engagement" hasn't eased tension with China -- by many measures things are worse -- but now officials in Washington and Beijing do not argue over China's continued imprisonment of dissidents. Instead, they issue threats of a trade war, prompted by the Administration's insistence that China shut the factories that churn out 70 million pirated compact and video disks a year.

And as the Latin American summit in Miami last month proved, the Western Hemisphere is going the way of the economic gurus as well; the secret airstrips where the C.I.A. once flew arms to the contras now look like promising distribution channels for the new "Free Trade Area of the Americas." That is, unless the Mexican crisis sinks Mr. Clinton's plan for creating millions of jobs in the United States by building export markets throughout the the hemisphere.

"The question isn't whether Warren Christopher will stay in his job," one State Department official active in economic issues said the other day. "The question is why he has given so much of it away."

The answer is that he had little choice. Mr. Christopher has few levers to pull when it comes to helping direct international capital flows around the world -- and access to capital is the leading subject of discussion these days. The State Department has a large economics section, of course, but it plays little role in coordinating economic foreign policy. Money's the High Card

The rise of the Age of the Finance Minister, of course, is not entirely new: James A. Baker 3d carved out a lot of the territory when he served as Ronald Reagan's Treasury Secretary. But in the Reagan and Bush years, as throughout the cold war, keeping the anti-Soviet alliance together always trumped commercial concerns. Two years into the Clinton Administration, things have changed. To tell the difference, just peek inside the situation room -- not the one at the State Department, but the new one, over at Commerce.

Technically, it is the "Advocacy Center," a sleek computer room staffed by specialists who track, minute by minute, the status of thousands of giant projects around the world that American firms are vying to win. "The idea is to bring the whole force of the Government together to press the case for American business -- ambassadors, commercial officers, investment bankers, the Ex-Im Bank or OPIC," he said, naming the two government agencies that have taken a major role in financing big deals abroad. Competitors are also tracked.

On Thursday, 24 hours before Commerce Secretary Ron Brown's departure with an entourage of officials and industry executives to India, the screens were flickering with data about big electric power and telecommunications projects still up for grabs. "I for one was tired of seeing President Mitterrand and President Kohl travel the world representing their country's industry while we stood back and did nothing," Mr. Brown said last week. "Our attitude was, 'Good luck, let us know how it turned out.' "

But a series of deals does not constitute a foreign policy. The risk, of course, is that relentless pressure to buy, buy, buy American undercuts alliances and breeds resentments. Just ask the Australians, who are among America's most critical strategic allies and are outraged by the Agriculture Department's plan to help American dairy farmers export to Australia's markets. At the height of the cold war, when exports meant little to Americans and defending against Soviet attack meant a lot, the decision would have been easy. Now it may take up most of Mr. Rubin's day.